Welfare and growth effects of alternative fiscal rules for infrastructure investment in Brazil

Resumo

This article studies the interplay between fiscal rules, public investment and growth in Brazil. It is investigated if it would make sense to raise public investment and, if so, under which fiscal rule it is best to do it — whether through tax financing, debt financing, or a reduction of public consumption. We construct and simulate a competitive general equilibrium model, calibrated to Brazilian economy, in which public capital is a component of the production function and public consumption directly affects individuals’ well-being. After assessing the impacts of alternative fiscal rules, the paper concludes that the most desirable financing scheme is the reduction of public consumption, which dominates the others in terms of output and welfare gains. The model replicates the observed growth slowdown of the Brazilian economy when we increase taxes and reduce public capital formation to the levels observed after 1980 and shows that the growth impact of the expansion of tax collection in Brazil was much larger than that of public investment compression.

Ficha do documento

Tipo

Estudo

Ano

2006

Instituição

Escola de Pós-Graduação em Economia da FGV

Fonte

Repositório da FGV

Idioma

Inglês

Acesso

Não informado

Identificador

oai:repositorio.fgv.br:10438/12509

Temas

EconomiaInfraestruturaFinanças Públicas

Palavras-chave

Public goodsWelfare and growthPublic debtinfrastructureEconomiaInfraestrutura (Economia) - Modelos econométricosBem-estar econômico - Modelos econométricosDívida pública - Modelos econométricos